Internet tax push gains currency

SAN FRANCISCO — The days of the Internet as a tax-free shopping zone may be numbered.

Sen. Dick Durbin (D-Ill.) is expected to step into the escalating Internet sales tax battle as soon as this week with a bill that would allow the 44 states — plus Washington, D.C. — that collect sales taxes to require out-of-state online retailers to pay up.

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Durbin’s Main Street Fairness Act is similar to some previous congressional efforts to weigh in on whether states can force online businesses to collect sales taxes on items sold to state residents. But while those efforts failed, this year may be different.

Faced with state budget shortfalls, some large states like Texas, California and Illinois are looking to online retailers for additional tax revenues. As a result, large e-tailers — such as Amazon.com — have threatened to cut off affiliates who sell in those states rather than start collecting taxes.

“Federal legislation is needed to solve this issue comprehensively and uniformly and there is no time like the present,” said Michael Mazerov, a senior fellow at the Center on Budget and Policy Priorities.

Similar legislation introduced last year by former Rep. Bill Delahunt (D-Mass.) went nowhere. However, the dynamics in Congress may have changed now that a growing number of states have passed or are considering bills to address the issue and online businesses are faced with the possibility of complying with many different state laws and many different state sales tax rates.

Retailers that already collect sales taxes on online or offline purchases argue that the current system gives an unfair competitive advantage to online retailers like Amazon and others who do not have brick-and-mortar stores inside the state because shoppers can go online to avoid sales tax.